Farmer v Heart of Birmingham Teaching Primary Care Trust & Ors (Jurisdictional Points: Worker, employee or neither) [2016] UKEAT 0180_15_2203

EAT
Farmer v Heart of Birmingham Teaching Primary Care Trust & Ors (Jurisdictional Points: Worker, employee or neither)
[2016] UKEAT 0180_15_2203 · 2016-03-22
[23]Subject to two qualifications, both of which are explained by Carnwath LJ in his admirable judgment in KPMG LLP v Network Rail Infrastructure Ltd [2007] Bus LR 1336 , I would accept this statement, which is in my opinion no more than an expression of the common sense view that we do not readily accept that people have made mistakes in formal documents. The first qualification is that “correction of mistakes by construction” is not a separate branch of the law, a summary version of an action for rectification. As Carnwath LJ said, at p 1351, para 50:
“Both in the judgment, and in the arguments before us, there was a tendency to deal separately with correction of mistakes and construing the paragraph ‘as it stands’, as though they were distinct exercises. In my view, they are simply aspects of the single task of interpreting the agreement in its context, in order to get as close as possible to the meaning which the parties intended.”
[24]The second qualification concerns the words “on the face of the instrument”. I agree with Carnwath LJ, paras 44-50, that in deciding whether there is a clear mistake, the court is not confined to reading the document without regard to its background or context. As the exercise is part of the single task of interpretation, the background and context must always be taken into consideration. 25. What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. In my opinion, both of these requirements are satisfied.” 51. I note that Lord Hoffmann there was dealing with principles of construction and not with the equitable remedy of rectification. On the subject of what evidence is admissible for the purpose of construing a contract, he said this at paragraphs 64 and 65:[64]“ 64. The other case is the decision of Laddie J in Cambridge Antibody Technology Ltd v Abbott Biotechnology Ltd [2005] FSR 590 , in which he rejected a submission that evidence of the subjective state of mind of one of the parties contained in statements which had not been communicated to the other party (“crossed the line”) was inadmissible. In my opinion, Laddie J was quite right not to exclude such evidence, but that is not inconsistent with an objective approach to what the terms of the prior consensus were. Unless itself a binding contract, the prior consensus is, by definition, not contained in a document which the parties have agreed is to be the sole memorial of their agreement. It may be oral or in writing and, even if the latter, subject to later variation. In such a case, if I may quote what I said in Carmichael v National Power plc [1999] 1 WLR 2042 , 2050-2051:
“The evidence of a party as to what terms he understood to have been agreed is some evidence tending to show that those terms, in an objective sense, were agreed. Of course the tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done.” 65. In a case in which the prior consensus was based wholly or in part on oral exchanges or conduct, such evidence may be significant. A party may have had a clear understanding of what was agreed without necessarily being able to remember the precise conversation or action which gave rise to that belief. Evidence of subsequent conduct may also have some evidential value. On the other hand, where the prior consensus is expressed entirely in writing, (as in George Cohen Sons & Co Ltd v Docks and Inland Waterways Executive [1950] 84 Ll L Rep 97) such evidence is likely to carry very little weight. But I do not think that it is inadmissible.” 52. So I come to the submissions of the parties. For the Appellant, Mr Roberts submitted that the Tribunal had fallen into the error of deciding the identity of the employer on the basis of the subjective intentions of the parties, in particular of those representing the employer’s side; instead of deciding the issue by ascertaining objectively which of the Respondents assumed the obligations of being the employer. 53. Mr Roberts said that was the wrong approach, especially where, as in this case, the Workstep agreement of 2005 had been put into writing and signed by the parties. He also referred me to two additional documents subsequent to the Workstep agreement not referred to in the Tribunal’s decision. In the course of producing a “review record” in July 2008 and again in February 2010, the parties had once again been identified as they had been on the face of the Workstep agreement: the “employer” representative being that of the Trust and not the Council. 54. Mr Roberts submitted that the Employment Judge had been dismissive of objective evidence of factors that needed to be weighed when ascertaining what the parties’ respective contractual obligations were; in particular, a job description document referred to at paragraphs 52 and 53 of the Judge’s decision; and the fact that the interview for the post was conducted by the Trust and not the Council (see paragraph 54). 55. Mr Roberts criticised the decision as concentrating too much on how the Scheme operated (for example, see paragraphs 61 to 71) even though it was not suggested by the Respondents that the documents containing the Scheme’s terms were ever provided to the Appellant. Mr Roberts’ criticism was that the Judge attached a lot of weight to the terms of the Scheme and that those terms were only capable of indicating one party’s subjective understanding of the meaning of the contract. 56. In relation to the Workstep agreement in 2005, Mr Roberts submitted that its purpose was indeed to provide continuity and that the status quo that it was intended to preserve was that the employer was and remained the Trust. He relied in that regard on the provision I have already mentioned providing for a permanent position starting on “15 th July 1992”. 57. He pointed out that the Workstep agreement is the only written document setting out the respective obligations of the parties; that it makes clear that the employer is the Trust and, further, what role the Council was to play; and that a contract signed by all three parties must be taken to contain the terms agreed between those parties unless there is a very good reason for deciding otherwise. 58. He submitted, further, that this was not a case in which it could be said that the contract terms were a sham; there was no suggestion of attempting to mislead anyone and if the terms had been mistaken the remedy for that would be the equitable remedy of rectification, which is not available in an Employment Tribunal and no such claim had been made elsewhere. He criticised in particular the passage in paragraph 118 of the Tribunal’s decision in which the Tribunal said this: “118. I fully accept the evidence of Sharon Worth that there was no intention to change the identity of the employer at this time and that as far as she was concerned the documentation was only needed for the purposes of dealing with the change from the Scheme to Workstep.” 59. He pointed out that earlier, at paragraph 108, the Tribunal had accepted: “108. … the evidence of the Respondent that other than the name, in essence little of substance changed and things continued as they had previously under the Scheme, certainly insofar as the Claimants [sic] position was concerned. …”
That was not, Mr Roberts noted, accompanied by any finding that any conversation had taken place between the Appellant and either of the other two parties about what the Workstep agreement meant. 60. In the alternative, Mr Roberts submitted that if his submissions about the continuity of the arrangements going back to 1992 were wrong, the Workstep agreement was a variation of the 1992 contractual arrangements, which changed the identity of the employer. He said there was no evidence to contradict what the Workstep agreement said on its face, i.e. no evidence of a common intention that the identity of the employer should not change. 61. Once again he submitted that the Tribunal had impermissibly crossed the line into interpreting what the Workstep agreement meant by accepting the subjective understanding of it of Ms Worth, as shown in paragraph 118, rather than confining the Tribunal’s treatment of her evidence as, at the most, relevant to what might have been the objectively determined meaning of the Workstep agreement. 62. For the Council and the Secretary of State Mr Beever submitted as follows. He said the Appellant’s submission is very difficult to make good because the evidence of Ms Worth’s understanding was not said by the Appellant to be inadmissible. Mr Beever submitted that there was nothing in the decision that rendered irrelevant the findings of fact that the Employment Judge made. 63. He pointed first to paragraph 24 of the Tribunal’s decision, which said this:
“24. A starting point in considering the question of the relationship between the parties will be the terms of any written agreement between them. However, those terms should only be disregarded where they do not reflect the true agreement between the parties - in other words where the contractual terms do not reflect the actuality of the relationship ( Autoclenz …).” 64. Mr Beever submitted that that was a proper and correct statement of the law, which was properly applied to the facts as expressed in the conclusion of the Tribunal at paragraph 175 in these terms: “175. However, as I have set out earlier in my findings of fact, I am satisfied that this Agreement did not reflect either the reality of the situation or the intention of the parties which, although not determinative of itself, is still a relevant consideration.”
He relied in particular on the words “although not determinative of itself”. 65. Mr Beever submitted that what the Employment Judge did was to use the evidence of the subjective intentions of the parties not for the impermissible purpose of thereby determining what the contract meant, but for the permissible purpose of giving some indication what, objectively, the parties’ respective obligations were. He said that the Judge did not wrongly use subjective evidence of intention in order to recast the contract. 66. As to the contractual arrangements in 1992, he submitted that the Tribunal’s treatment of that issue was equally unimpeachable; and he referred in particular to paragraph 75, where the Judge said this: “75. On balance, therefore, and having regard to the conversation that had occurred previously with Melissa Jameson and the fact that the terms and conditions of employment were to emanate from the Council, I am satisfied that the offer was made and accepted by the Claimant on the basis that employment would be with the Council.” 67. Mr Beever submitted that that finding included objective evidence of a common understanding based on a conversation between Ms Jameson of the Council and the Appellant, and on the letter written to him, which he did receive. 68. Mr Beever’s further submission was that the Employment Judge was aware of and alive to the point that another letter to which the Judge referred, sent contemporaneously in July 1992 to the Trust, about the employment arrangements of the Appellant, was not sent to the Appellant. The fact that the Judge went out of her way to mention that it was not sent to the Appellant (see paragraph 78) showed that she was well aware of the need to use caution when setting out and relying on subjective intention evidence and the limited purpose for which it could be considered. 69. Mr Meichen supported the arguments of Mr Beever and adopted them on behalf of the Council, which also takes the position in this appeal that the Employment Judge’s decision was correct and that the Appellant was the Council’s employee and not the Trust’s, at all material times. Mr Meichen submitted that the Judge correctly followed the approach of the Supreme Court in Autoclenz and made no error of law either in relation to the 1992 arrangements or the 2005 arrangements. 70. I come, then, to my reasoning and conclusions. First, the Employment Judge directed herself in rather brief terms at paragraph 24 of her decision, where she set out the principles she derived from the decision of the Supreme Court in the Autoclenz case. It was an abbreviated statement of the applicable principles, but it was not in itself a misdirection of law. In Employment Tribunals, as elsewhere, brevity is a virtue. The Judge did not get off on the wrong foot by encapsulating the principle in the way that she did in that paragraph. I also bear in mind Mr Beever’s point that at paragraph 175 of the decision, the Judge made it clear she was aware that the subjective intention of the parties was “not determinative”. 71. Nevertheless, it remains to consider whether the Judge was impermissibly distracted by the evidence of Ms Worth’s subjective intention and placed too much weight on the evidence of the terms of the Scheme, which were not communicated to the Appellant and thus could not provide support (other than, perhaps, by raising an inference about what probably was or was not communicated to the Appellant at the time) for a common understanding of the parties. 72. In approaching that issue, I bear in mind that the parties’ conduct subsequent to the 1992 arrangements is of some objective probative value. It throws light on how the parties jointly viewed those arrangements, made a very long time ago and evidenced only by a few letters (cf. the passage in Lord Clarke’s judgment in the Autoclenz case at paragraphs 30 and 31, where he cited from the judgment below of Smith LJ, and see at 1167F-G). 73. The Tribunal’s account of the law was incomplete in that it omitted any mention of the way in which a Tribunal should treat extrinsic evidence of what the contract meant, as discussed by Lord Hoffmann in Chartbrook at paragraphs 64 and 65, and it omitted any reference to the notion of correcting a mistake by construction, as also discussed by Lord Hoffmann in Chartbrook at paragraphs 22 to 25. 74. Did the Tribunal nonetheless in substance apply the correct principles to the facts as it found them, and thus reach a conclusion that cannot be disturbed in this Appeal Tribunal? I shall deal first with the 1992 arrangements. After reflection and viewing the Tribunal’s findings in the round, I consider that those findings were open to the Judge and not perverse nor tainted by any misunderstanding of principle, error of law or misdirection. 75. In particular, at paragraph 72 the Employment Judge referred to a telephone call between Ms Jameson of the Council and the Appellant pre-dating his employment in 1992. In that call she introduced herself, talked about the Scheme, told the Appellant he was being offered employment and did not suggest that his employment would be directly with the (then) Authority. The Judge reached the factual conclusion that the Appellant was not told at that or any other point that his employment would be with the Trust (then, the Authority). 76. Secondly, in the next paragraph the Tribunal referred to the letter of 10 July 1992 offering employment to the Appellant, not stating in that letter that the employment would be with the Authority, although the letter did state that the Appellant would work “with” what is now the Trust and “under” the Scheme. The Tribunal then at paragraph 75 reached the conclusion that: “75. … having regard to the conversation that had occurred previously with Melissa Jameson and the fact that the terms and conditions of employment were to emanate from the Council, I am satisfied that the offer was made and accepted by the Claimant on the basis that employment would be with the Council.” 77. It seems to me that that was a finding which was open to the Tribunal and cannot be impugned in this Appeal Tribunal, which deals with points of law only. 78. I am reinforced in that conclusion by the findings of the Tribunal about the conduct of the parties subsequent to the 1992 contractual arrangements: see paragraph 83, referring to the provision of a statement of particulars of employment by the Council of the Appellant; paragraph 84, referring to the Appellant’s signed acknowledgement of a health and safety policy document emanating from the Council; and paragraph 90, referring to the absence of any subsequent query from the Appellant as to why he had been sent particulars of his employment terms by the Council; and the evidence of his joining the Council’s pension scheme. 79. I then turn to the contractual arrangements in 2005. There is no doubt that the Workstep agreement was not a sham; it was a shambles. This is not a case in which the parties set out to create a document that would deliberately mislead others about what the true nature of their respective obligations was. This is a case in which there is no doubt, if the Respondents are correct, that the Workstep agreement did not mean what it said about the identity of the employer. 80. It seems to me that extrinsic evidence relevant to the meaning of the Workstep agreement was admissible in this case to the limited extent explained by Lord Hoffmann in Chartbrook at paragraphs 64 and 65. It follows that the Employment Judge was not wrong to admit that evidence provided she limited herself to doing so to that extent only. After reflection, I am persuaded that the Employment Judge did not fall into the error of using the evidence of Ms Worth, about the subjective intention of the Trust, as determinative of the meaning of the Workstep agreement. 81. The Judge was entitled to have regard to that evidence, in addition, for the purpose of applying the principles discussed in the speech of Lord Hoffmann in Chartbrook at paragraphs 22 to 25, namely, the correction of mistakes by construction. 82. Here, there was evidence before the Employment Judge entitling her to find that there was an objective common understanding between the parties that the Workstep agreement did not mean what it said about the identity of the employer; see in particular paragraph 122, where the Tribunal said this: “122. There is no suggestion made by the Claimant in his evidence that he was told at this stage [at the time of the Workstep agreement] that he was now to be employed directly by the Trust and not by the Council. He was effectively told that things would continue as normal and at that stage I am satisfied that he believed his employer to be the Council and not the Trust. There is no suggestion, therefore, that come 2005 the parties had decided to vary the previous arrangements between themselves to provide for the Claimant to be a direct employee of the Trust.” 83. That is a finding properly made, in my judgment, about an objectively determined common understanding between the parties about the identity of the employer from July 2005. 84. The mistake in the Workstep agreement, on the Judge’s findings, is so stark and so extreme that I have considered anxiously whether her conclusion can be justified, applying the principles that I have already mentioned. The Judge gave the Workstep agreement a meaning that directly contradicts what it says on its face. But I do not, ultimately, accept that it was wrong for her to do so as a result of placing unwarranted reliance on subjective factors. 85. The exercise of determining whether the mistake was made and, if so, the correction by construction needed to cure it, was one of fact for the Employment Judge. In making the finding she did about the identity of the employer, she effectively applied the principle of curing a mistake by construction of the contract, albeit without formulating that principle or saying that that was what she was doing. 86. For those reasons, I think the Judge was entitled to find that this was another exceptional case where, as in Kalwak , the contract did not reflect the objectively determined true bargain between the parties; here, because in short, it named the wrong employer. 87. I also bear in mind that the Judge was entitled to have regard to the conduct of the parties subsequent to 2005 (see in particular paragraphs 141 to 144 of the decision). The Tribunal found that in 2010 the Appellant expressly rejected the idea of becoming employed directly by the Trust for the very good reason that he would thereby lose 18 years of continuous service. That evidence was relevant and admissible to show what the common understanding of the parties was. It is difficult to square that position taken by the Appellant with the notion that he considered himself to be already an employee of the Trust. 88. I am, for those reasons, in the end not persuaded that the Employment Judge made an error of law, and I must dismiss the appeal.